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WTO talks collapse: risk assessment for chemical firms doing business in EU.

President Bush's aggressive protrade agenda was dealt a significant blow in September when negotiations at the fifth Ministerial Meeting of the World Trade Organization (WTO), held September 10-14 in Cancun, collapsed on the final day. The straw that broke the camel's back in Cancun came after trade ministers dead-locked on the so-called "Singapore issues," which deal with trade facilitation, investment, competition policy and transparency in government procurement. During a press conference held shortly after the talks fell apart, U.S. Trade Representative (USTR) Robert Zoellick admitted the significant setback made it unlikely that the "Doha Round" of WTO negotiations could be concluded by the January 1, 2005 deadline.

The collapse of the Ministerial was an unexpected conclusion to five days of talks that, until the very end, were primarily dominated by controversies over agricultural issues. This came to a head, more or less, when a group of 21 developing nations including Argentina, Brazil, China, India, Costa Rica, and Guatemala, or the G-21, launched a coordinated effort to push for an agreement in agriculture that was unpalatable to developed countries such as the U.S. and the European Union. In the days following the collapse, those who attended the meeting indicated the ultimate failure of the talks was not really all that surprising given the harsh words and rhetoric exchanged by developing and developed countries.

The Cancun debacle also represents the first major setback for the Bush Administration after a string of victories in its efforts to advance its ambitious free trade agenda. Up until September 14, in fact, the White House could claim credit for winning a hard-fought battle in Congress to regain Presidential trade promotion authority (TPA), the successful negotiation of U.S. free trade agreements with Chile and Singapore and the launch of free trade agreement negotiations with some 14 countries.

But now, in the wake of the failed Ministerial Meeting, members of the non-woven fabrics industry are among those left scratching their heads as to what happens next. While some are questioning the viability of the WTO as a vehicle to successfully achieve tariff reductions and eliminations worldwide, others are wondering if the events which unfolded in Cancun will ultimately shift U.S. attention more directly to bilateral free trade agreements (FTAs) instead of multilateral WTO talks. The U.S. is currently involved in FTA negotiations with numerous countries--the "CAFTA" talks between the U.S. and five Central American nations as well as the Free Trade of the Americas Agreement, which would expand NAFTA throughout Central and South America being two prime examples, and experts in both the public and private sector are now arguing that FTA efforts must take priority over WTO negotiations in the wake of Cancun.

While trying to predict the future of the Doha Round and other free trade agreements is obviously speculative, it is a worthwhile exercise to review some of the events leading up to the WTO Ministerial Meeting and discuss some possible outcomes.

A History Of Instability

Leading up to the Ministerial Meeting, skeptics had long questioned the prospects for success in Cancun largely because of the WTO's inherently unstable structure. The WTO has a vast membership (148 member countries and counting) that is composed of developed, developing and undeveloped countries alike. The economic disparities, cultural differences and conflicting needs of the various member countries make disagreements unavoidable, skeptics argue, in an organization that relies on consensus decisions. To this point, it is noteworthy that four of the 10 Ministerial Meetings which have taken place since 1982 under the WTO and its predecessor the General Agreement on Tariffs and Trade (GATT) resulted in failure.

That said, however, a renewed sense of optimism was breathed into the WTO with the successful launch of a new round of negotiations in 2001 in Doha, Qatar. Termed the "Doha Development Agenda," the mandate for the round placed special emphasis on the needs of poorer countries and energized many of those countries that felt their concerns had been ignored in the past.

The Bush Administration shared in this sense of optimism. Bolstered by the reinstatement of TPA, a Republican majority in both the U.S. House of Representatives and Senate and the presence of USTR Zoellick, the White House had high expectations for the Doha Round. This optimism was displayed in the form of ambitious proposals to the WTO from the USTR, such as a market access proposal, calling for the elimination of all tariffs on consumer and industrial goods traded between WTO members by 2015 (please see "Capitol Comments" January 2003). Even after various obstacles cropped up in the months leading up to Cancun, U.S. trade officials repeatedly stated their belief that the Doha Round would be completed by the self-imposed deadline of January 1, 2005.

Despite these assertions, a series of missteps leading up to the fifth Ministerial Meeting must have cast some doubt in the minds of U.S. officials. Late last year, for instance, WTO negotiators failed to secure compromises on several key issues as prescribed in the Doha declaration. Several months later, WTO members missed crucial deadlines to reach agreements on a negotiating framework to be used during the agricultural and non-agricultural market access negotiations.

While WTO trade ministers did manage to clinch an important deal just days before the launch of the Cancun meeting, in the end, an inability to compromise pervaded the talks in Cancun and ultimately caused the meeting to implode. As it stands now, senior officials of the WTO's General Council have agreed to convene a meeting in December in an effort to "take the action necessary at that stage to enable us to move towards a successful and timely conclusion of the negotiations."

Reaction And The Future

Although Ambassador Zoellick refused to lay blame at the hands of the G-21--or anyone else for that matter--he did note that, "Whether developed or developing, there were [Ministers from] 'can do' and 'won't do' countries [in Cancun]. The rhetoric of the 'won't do' overwhelmed the concerted efforts of the 'can do'. 'Won't do' led to impasse."

But what remains to be seen is whether events that transpired in Cancun may spill over and inhibit successful completion of FTA negotiations involving the U.S. and certain countries in Central and South America. During an interview held after the Ministerial Meeting, for instance, Sen. Charles Grassley (R-IA), Chairman of the Senate Finance Committee, suggested that U.S. trade officials should reconsider including G-21 countries such as Brazil, which is identified by some as a ringleader in the G-21 opposition movement, in the Free Trade Area of the Americas Agreement.

Sen. Max Baucus (D-MT), Ranking Minority Member of the Senate Finance Committee, issued a somewhat less strident, but still cautionary, message in his comments made on the Senate Floor September 17 when he said " ... many of the same countries who are negotiating FTAs with us joined the [G-21] and helped deadlock the Ministerial ... I don't think we should overreact. Punishing trading partners with whom we have differences of opinion is not likely to be productive in the long term. That doesn't mean they get a free pass ... they should realize we have other countries to look to."

These warnings are not all one sided. Southern Common Market (Mercosur) trading block members Argentina, Brazil, Paraguay and Uruguay recently warned the U.S. that, 'the same issues that have created an impasse at the Cancun ministerial conference are now present in the FTAA negotiations agenda." Nevertheless, USTR officials and U.S. industry interests have expressed opinion that the failure in Cancun highlights the need for even more diligence in securing success in the FTAA and CAFTA negotiations, as well as other free trade agreements in which the U.S. is already involved.

For the nonwovens industry, INDA, Association of the Nonwoven Fabrics Industry, Cary, NC, has secured an early-November meeting between Ambassador Zoellick and representatives of its executive committee. In this meeting, INDA intends to express its desire for continued ambition in the pursuit of ongoing and future bilateral and multilateral free trade agreement, and to remind the USTR that the interests of our industry are markedly different from other sectors of the textiles and apparel industry.

As articulated in position statements adopted by INDA's International Trade Advisory Board (ITAB), U.S. nonwovens producers crave the elimination of duties on roll goods by other countries throughout the world. Whether these duty eliminations are achieved in one fell swoop through the resuscitation and successful completion of the WTO's Doha Round negotiations--or come on a more piecemeal and limited basis through FTA negotiations between the U.S. and other countries--is less important than continued efforts to reach goals spelled out by INDA's ITAB. But, we will encourage USTR to pursue these opportunities where ever they present themselves.

Peter Myberry's column appears monthly in NONWOVENS INDUSTRY
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Title Annotation:Capitol Comments
Author:Maybery, Peter; Franken, Jessica
Publication:Nonwovens Industry
Geographic Code:00WOR
Date:Nov 1, 2003
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